Where Can Millennials Afford to Buy a Home?

Where Can Millennials Afford to Buy a Home?

May 17, 2018

Children are indeed our future. And with the change in the economy that was brought about by the the recent recession, there are many markets where it seems as though our children will have a harder time owning a home than their parents before them. There has been a great change in buying power contrasted by how millennial migration has changed. Young adults (as of 2015) are predicted to overtake Generation X. Millennials are quickly becoming the largest group of potential home buyers and their need for home ownership in is becoming increasingly more important. With that being said, it leaves one to wonder where millennials can afford to buy homes.

When it comes to the coastal markets, the answer to such a question is discouraging. For the fourth quarter of 2014, only 60 percent of listed homes for sale in cities like New York City, Boston, and Miami were found to be affordable for the average 23 to 34 year old. This was determined by using the median income of young adults in each metropolitan area where the study was conducted. It was assumed that the millennials would put down 5 percent of their income then spend 30 percent of their monthly wages on mortgage payments.

On the west coast, things simply are not much better, as that coast is notorious for being particularly expensive. Just 25 percent of homes in cities like Los Angeles and Honolulu are affordable for millennials. And home prices in regions like these are continuing to increase as wages for Millennials remain stagnant. Even in California’s smaller metropolitan areas like Sacramento, Fresno, or Modesto, more than 60 percent of the homes in those markets are simply out of reach for most Millennials.

On a national level, 70 percent of homes listed on the market were found to be affordable to young adults in 2014. And with what we’ve just covered, it comes as no surprise that many coastal cities fell short of this finding, like Oregon’s largest city Portland (51 percent), Washington’s largest city Seattle (63 percent), the nation’s capital Washington, D.C. (64 percent) and Texas’ largest metropolitan area, Houston (68 percent).

If millennials are in search of a market where they will have a little more buying power when it comes to the purchase of their first home, metropolitans in the middle of the country tend to offer more choices. Of course, there are exceptions to this rule, like the ever expensive Chicago and its surrounding areas. A whopping 90 percent of homes in Akron, Ohio are affordable for millennials. In line behind Akron are Buffalo, New York (86 percent), St. Louis, Missouri (85 percent), and Des Moines, Iowa (85 percent). Eighty-two percent of homes in Pittsburgh, Pennsylvania are affordable for millennials while 80 percent of homes are within reach for the generation in cities like Louisville, Kentucky and Kansas City, Missouri. Indianapolis has 79 percent of its homes affordable to millennials while Omaha, Nebraska and Minneapolis, Minnesota are not too far behind, with 77 percent and 75 percent, respectively, of their homes being in the millennial budget.

Here in San Diego County, it is possible for Millenials to realize home ownership. But apparently not as much as other cities, unfortunately. After all, it’s one of the staples of The American Dream! Despite the fact that workers in the San Diego-Carlsbad Metropolitan Statistical Area had an average (mean) hourly wage of $26.06 in May 2015, about 12 percent above the nationwide average of $23.23, according to the U.S. Bureau of Labor Statistics, that is not specific to the lower wages of Millenials. Note this excerpt from the San Diego Union Tribune:

San Diego County’s median income dropped by 1.5 percent and its millennial population increased 3.9 percent. “Surprisingly, metropolitan areas on the interior saw the biggest increases in millennial population,” said Andrew Woo, report author and data director at Apartment List. “Unsurprisingly, millennials are attracted by strong job markets.”
In terms of overall millennial growth, San Diego County ranked No. 24 out of the 50 biggest metros. That was ahead of New York City, Las Vegas, Portland and Chicago.

The problem is they aren’t staying, likely because of high housing costs.San Diego County had the second-biggest millennial homeownership rate drop among the 50 metros, sinking 8 percent in the decade studied. It had a 19.8 percent millennial ownership rate in 2015.

Despite the bad news, with good (or even decent) credit history, and a bit of time to save up for a downpayment, home ownership for Millenials in San Diego can be in achieved – but not without a good bit of hard work involved. Most are taking the American Dream elsewhere (the following statistics are from “Apartment List):

Largest millennial population growth from 2005-2015

Based on the 50 largest metro areas

1. Charlotte (30.7%)

2. Houston (17.4%)

3. Austin (16.4%)

4. Seattle (15.3%)

5. Omaha (14.3%)

6. Nashville (13.8%)

7. Indianapolis (12.5%)

8. Tulsa (11%)

9. Orlando (10.5%)

10. Columbus (9.7%)

Regardless of where you purchase a new home, the first step should be to get prequalified for a home loan. To do that, you can start here.